College Dropout to Real Estate Developer in 3 Years
Looking to diversify your assets and invest in real estate? In this video, Shafi Noss, founder of Noss Invesments, discusses how he created a private debt real estate fund within three years through networking and perseverance.
Ariel Herrera 0:00
Hey, fellow real estate investors. In this video, we're going to be talking to Shafi nos, the founder of nos investments. He's had an incredible journey within the last three years, where he scaled up his real estate experience by networking, and ultimately has created his own company. And if you're interested to maybe be a passive investor in future deals, and this is definitely the video for you check it out
welcome Shafi to the analytics area channel. So happy to have you here.
Shafi Noss 0:36
Yeah, I'm glad to be here.
Ariel Herrera 0:38
Awesome. Yeah, we met not too long ago. I mean, it's also like not too long ago, but it's already been about a year or so right? Off of the BiggerPockets. Forum.
Shafi Noss 0:48
Yeah, a year I think we connected over. I don't remember if you posted or I posted about something related to machine learning. And we're both kind of interested in exploring that. That's how we first got in touch.
Ariel Herrera 1:01
Yeah, exactly. Love it. So if you could just give the audience a little bit of a background of yourself, and how did you actually get into real estate?
Shafi Noss 1:10
Yeah, so I grew up in the DC area, and Bethesda, Maryland, and I took a gap year in Japan, that was really awesome. I think that was maybe the beginning of the entrepreneurial. Like, I don't know, essence or spirit, you know, going to a new country doing something that is not in the standard loop of graduating and going to school and getting a job. Now, when I got back and went to college, I experienced more of that I skipped class a lot. I grades were okay. But I always got really interested in the things that I cared about. Transferred a couple times eventually dropped out. There were things going on at the college, which were related to that, as well. But I've been interested in real estate. And after leaving, I got into it full time. And that's what I've been doing ever since then, I think around three years now I have a business doing private loans. So are clips for rental properties that don't qualify for bank financing, granite construction, and then I develop myself ground up in Austin, Texas with my partner, Brian Hancock. That's kind of been the arc of my career so far.
Ariel Herrera 2:40
That's excellent. And how did you get up to speed so quickly, within the real estate space?
Shafi Noss 2:46
What do you mean by that?
Ariel Herrera 2:48
So within three years to already have your own company where you're raising funds, you're also partnering with someone else. It's within three years. That's a great accomplishment. So I'm just wondering, do you have any mentors throughout the process? Or were you reading a lot? What was your source to get to speed?
Shafi Noss 3:08
I want to say that the reason for it is that I was I decided that I wanted to do real estate, and just did it full time. You know, I think most people who get into real estate, have full time jobs that they need to handle along with their real estate, you know, education and experience. And if you're working eight to 10 hours a day, that's a lot of time, I can take those eight to 10 hours and put them all towards real estate. And things go much faster when you're you know, quadrupling your, your daily time towards something. Yeah,
Ariel Herrera 3:48
that's a good point. And then, if you could just go a little bit more in detail of nos investments and how did it start? And where is it today?
Shafi Noss 3:58
Yeah, well, I guess it started like most companies where you know, you've got a little bit of a product going but not that much and you decide you want to get into it and just incorporate the LLC and then start doing things. And when I really got got like a first dose of experience with with a company called God investments with John Rubino based out of here in DC, and he helps channel funds into commercial development. I helped him out and I was kind of like looking at helping with the due diligence and financial analysis a little bit. I got first taste of, I guess industry experience work, you know, working on actual projects there. And that involved working with investors doing financial modeling. Another natural side of I mean counterpart to equity is that I started exploring loan brokering and the private debt market. And I just learned that from people, you know, I networked a lot, I really made a point of reaching out to people, even if there wasn't an immediate, you know, reason why might be connected is to find a good feeling about someone, I would say, I want to talk to you. And let's, you know, let's just stay connected. That's how we met. Right? Yeah. Reached out. And we talked. And then, somewhere along the line, I had an inkling that I really wanted to develop, I really liked. I really liked that for a variety of reasons. And I started putting feelers out there. And the skills of financing, both that inequity synergize with that are important way to add value. And I, my partner, Brian, through networking as well. And we we first met online, and then we didn't talk for like a year. Then we reconnected again a year later, and we're talking about things and it just kind of took off from there. It was never a clear path forward. It was always like taking a bunch of chances that we're very unlikely to pay off. But if you do that enough, one of them catches. And that changes everything. Yeah. I think that's that's kind of the structure that's taken so far. And, and maybe well, in the future to
Ariel Herrera 6:32
Excellent. Yeah, I completely agree with you where persistence is really key, even those small steps, they compound at some point where you're making so much more progress than you did before. And your networking skills are absolutely fantastic. Just as a little bit of a deep dive into there, how often were you meeting with new people say, every month?
Shafi Noss 6:56
Um, well, I think this is related to the fact that I could spend lots of time doing it. But I tried to reach out to someone, like maybe not every day, but every couple of days. Yeah. And a lot of that was online, I think people were more open to being online because of COVID. And that helped. Yeah, there's just lots and lots of networking as much as possible. So say, if
Ariel Herrera 7:29
I'm really interested in using real estate as an investment vehicle, but I have a W two or big job, and I just can't handle trying to figure out real estate entirely, I want to be able to park my money somewhere and have someone that can actually work with it and give me high returns. So what would be one of the first steps into working with a company like yours?
Shafi Noss 7:53
Um, well, I think the first thing clear is what kind of investments you're looking for. Because I mean, I try to put together a good investment product. But it's not for everyone. It does something, you know, some is specific. And there are other investment products that are out there that are a better match potentially or, or maybe mine is a better match. But I think the first thing people should do is know what all the options are. A lot of people don't know, I do a spec home development in Austin. I can't talk about it publicly because of the offering type. But you know, they're for people we know personally and they give pretty decent returns the liquidity is is decent. But like some disadvantages to say a owning a rental property is with a rental property, you get more cash flow. Disadvantages, you have to leave your money in longer. Probably the overall returns are lower unless you pick the good property. There's also you know, if you want to move a lot of cash, then my spec home deals aren't, you know, they're usually a million dollars in size or so for the couple we're working on right now. And we only need to raise a fraction of that. So you have lots of money you want to turn around, there might not be enough space. And you know, that's where the larger commercial deals, they might give lower return. But you can move a lot more money if that's what you need to do. So you know, look at liquidity and how much money you want to move your returns, the risks that you're taking. I think getting a clearer picture of all of those is a good first step and then knowing all the options that are out there and seeing which ones connect best with your goals and if you want to, you know learn about what I do. I'm sure you'll put some contact info in the notes or something and people can reach out to me and learn more about it.
Ariel Herrera 10:10
Yeah, I think that's a great point that you made that not every single investment strategy can fit every single person. So that's great that you mentioned those points. And then you did mention spec homes. So just for a little more detail, what are spec homes?
Shafi Noss 10:28
spec homes are spec stands for speculative. And physically, in contrast to custom homes where somebody says, I want to live in a house like this. And then they hire a developer, like me and my partner or go to a builder directly to build them their house custom made. The other side of that is spec homes where the developer or builder builds the home first and then tries to sell it to the market without a specific buyer or direction, you know, guiding the construction on it.
Ariel Herrera 11:06
Okay, that makes sense. Yeah. And why Austin, Texas, just curious.
Shafi Noss 11:15
Well, I mean, a large part of it is that that's where I met my partner, Brian, and he has done, you know, 10s and 10s. of development done there already. But also, it's an amazing market. I mean, Tesla is moving its headquarters in Oracle is moving its headquarters in Apple campuses moving in. Zillow listed it as a top growth market for this year, largest VC scene in the country. I mean, it's just an COVID. All real estate, appreciated a lot. But Austin even beat the national average. And there are other really strong cities as well, you know, in Florida, and places in Georgia, and other places. But Austin is Austin is really strong.
Ariel Herrera 12:04
Yeah, they'd be a lot of benchmarks from what I was looking at data wise, it's actually one of my top two choices is between Austin and Tampa to live in. Yeah, just because it'll be a huge tech scene. If there's, you know, there already is one in Austin, but it's gonna grow even more. Yeah, that's really exciting.
Shafi Noss 12:23
Well, I have to come take a trip down sometime.
Ariel Herrera 12:26
Yeah, definitely. So I'd love to at the stage to pivot a bit and talk about one of the deals that maybe you're currently working on, or one that you've worked on in the past.
Shafi Noss 12:38
Yeah, well, I have talked about the deals that I'm working on publicly. Because I don't know if your viewers are familiar with this. When you're raising money, there are two ways to do it. Or there's more than two ways, but two of the common ways are called a 506, B, and five or six C exemption. And 506. C, you can advertise publicly and talk about your deals all you want. But then you can only accept accredited investors. We're using a 506. B, the other kind, which is where we can work with anyone but we can't advertise publicly. So
Ariel Herrera 13:20
got it. And actually, before we take the next step, what is accredited investors for those that aren't aware?
Shafi Noss 13:27
Yeah, so accredited investors, there are three tests for it. One of them is sort of new. One is you can have a network of $1 million or more have had that for the past year, or some number of months, I don't remember. You can qualify through income. That's if you have $200,000 annual income or more for the past two years. And third, you have certain licenses, like a series 65. license, and that will accredit you as well. And there there are some variations if you're married to like, you can have a million together with your spouse, that kind of thing.
Ariel Herrera 14:13
Right, and then those open you up to possibly more investments because you're seen as someone who has, I guess, sound judgment in that space. Right.
Shafi Noss 14:22
Right. Yeah. It's basically I think part of it was a reaction to a wave or one of the recessions where a lot of people who didn't have the net worth to be making risky investments, like real estate is, you know, if your net worth is 500k and you're investing 100 in some deal that some great person has sold you and said that it's amazing and then things go wrong, that can really hurt you If you're accredited, though, the government is basically saying, you know, do what you want, we're not going to give you any protections. If you're not accredited, and a company like mine doesn't treat you, right, you can get sued, and we're online. If you're accredited and you make these investments, then there's a lot less protection. But also the accredited investors can invest in many more things. And it's usually the case that if you're accredited, that's kind of when you have the free cash to be making these kind of investments anyway. You know, maybe policymakers have their own opinions about suitability for things, but that's my basic understanding of it.
Ariel Herrera 15:41
Got it? Yeah. Thank you so much for clearing that up. So then in terms of those two pieces of where investor structures are generally made, you're saying that yours is not just restrictive for accredited investors?
Shafi Noss 15:56
Yeah, that's right. It's open to non accredited investors. But that means that I have to know the person who's investing personally. And it's sort of ill defined what that means exactly. But, you know, talk to each other a few times as to kind of know the investor's financial situation and make sure they're not putting their foot in anything. And, but But yes, it is open to, to any investor. Okay, great. So
Ariel Herrera 16:30
that would open it up to a lot of the potential viewers that would be interested. And what would be your one of the recent deals or current deal that you have going on?
Shafi Noss 16:44
Well, the deals we're working on, right, I'll just kind of talk about them in the abstract. But they are back home built in Austin. And we've actually got a larger commercial project that looks like it's pretty solidly materializing. But the bulk of what we do is, you know, it's essentially buying a home that is not in good condition. And then knocking it down. And then building up a nice new, clean, safe home for a family that wants to live there. And the costs that go into creating this home are less than the sale price. And that spread is our profit on the deal. And the reason this is appropriate for Austin is because all these tech people are moving into Austin, many of them have great incomes, but they don't want to live in a little dinky are one of our projects was a It used to be a mobile home, which is very old and you know, 900 square feet or something. A family doesn't want to live in a home like that. They want to live in a nice, big, safe, clean home. And so we we knock down the old one and build up.
Ariel Herrera 18:17
Yeah. Yeah, that makes a lot of sense. And I would assume that there's Yeah, a lot of potential land or buildings to do that with.
Shafi Noss 18:29
Yeah, there's some land. I mean, Austin is also competitive. But that's really where my partner shines, as he has done many spec home deals before. Okay. He has a network of agents who know that he can close quickly. And he's not just saying he wants to do a deal, and then we'll realize that harder than than they thought. They know he can close eye so when we say we want to take on a deal. You know, there are several sources that are going to come submit a lot of things to us, and then we can we can pick out the one that like best. Got it. That makes sense. That makes it easier. Yeah.
Ariel Herrera 19:12
And then how has it affected over the last year because of Kobe? We seem like lumber prices go up? Sometime shortages of laborers. has that affected at all timelines or the construction of some of these buildings?
Shafi Noss 19:27
Yes, I mean, build costs are higher. It's not just wood, but paint and, and other materials have all gone up. At the same time, housing prices have gone up. And this is a risk in building which is that it takes time to build things. So if there's a sudden spike in housing demand, developers can come in and try to match it, but it's a pretty static, you know the supply of homes. It doesn't change that quickly. So. So what we're doing is we're, we're building with higher build costs. And we're, we're hoping that the market will stay high and not have some weird work. I don't see why it would I think there's good fundamentals for the prices going up. But you know, the short answer is, both costs have gone up. And that's just the fact of it. And home prices have also gone up. And so in a way, that's, that's balanced out.
Ariel Herrera 20:32
Yeah, that makes sense. Yeah. And then maybe not too specific. But in general, what are some things that maybe you do in your financial modeling or just research in general to be a little bit more risk adverse for potential changes?
Shafi Noss 20:50
I think gathering the opinion of other people who have experience and gathering those opinions from multiple sources is very helpful. So agents have real experience in the market. And if we can get opinions from more than one who aren't incentivized to just tell us that it's the best thing ever, I think triangulating expert opinions like that is is a really powerful tool. Kind of like peer reviewed academic articles. Yeah, you get a network of experts, not just one, and have them be motivated in the right way. And that's not perfect, right. Like, sometimes we get things wrong, but I think, you know, there aren't better tools to rely on that. That's going to be pretty strong if we're going to use something.
Ariel Herrera 21:48
Yeah, I think that's incredible. Being able to use expert opinions really use your network, and also plays into, like masterminds to, while mastermind groupings can be really effective as you're just pulling information and knowledge from others.
Shafi Noss 22:03
Yeah, exactly.
Ariel Herrera 22:05
Cool. So I'd love to just get a little bit more insight into like, what excites you about your day to day? And where do you see the company or maybe just your whole real estate journey? continue in the next five years?
Shafi Noss 22:21
Yeah, well, I am happy with the way work is going. My career, I really value is a skill that I learned from business, which is the importance of setting up infrastructure. And a lot of businesses about setting up infrastructure, I can set up infrastructure and the rest of my life, like, I don't know, there's going to be a video associated with this, but I have a piano behind me. And I set it up in a way where if I'm, like tired of working, I can just kind of flip my chair around and play the piano for a little bit. And since I have that setup, I started playing a lot more. And that was really fun. And it didn't, it made it so I didn't have to go to a lot of effort display. And I've tried to set up my business and life in a way where the things that are important, have infrastructure supporting them. And it's nothing really like, you know, a grand, exciting event. But, but a lot of the friction is gone. And I find that very enjoyable, it feels very easy to move through. Here,
Ariel Herrera 23:39
you don't allow yourself to get into a state where you're maybe overly stressed or can't think you give yourself those, you know, small moments to just escape. And this case, you get to prove your piano playing skills as well.
Shafi Noss 23:53
Yeah, exactly. Um, and as for the future, I mean, I really just want to continue to develop both sides of my business, I want to issue lots of loans and help people I think my rates are good, and my service is good. And there are lots of expensive loans out there that people don't need to pay a high rate for, and I think I can help them save money and that is good for me. I get business and I want that and I want to make money issuing these loans. But I also want to save people money from not getting other loans are more expensive, but I want to grow that a lot and and have it be a robot. And I want to keep developing I really like doing that feels like I'm contributing to the world and I enjoy the autonomy and creativity that goes into it. So yeah, just more of that.
Ariel Herrera 24:55
Yeah, you get to use a lot of your skill sets. And I've noticed a lot of people who are Successful in the real estate space, contrary to what maybe the public may think, and that it's all about money, a lot of the times the underlying is being able to help people. So I love that you actually mentioned that.
Shafi Noss 25:13
That's incredible. Or here's, here's the interesting thing that I'll add to that conversation. Are you familiar with the prisoner's dilemma?
Ariel Herrera 25:21
Yes, but I'm not feel free to explain it for the audience.
Shafi Noss 25:29
I'm bad at explaining it. It's basically where you're, you're interacting with another person, and you can either cooperate with them, or you can effect against them. And they can make the same choice of cooperating with you or defecting against you. And if you effect and they cooperate, you like take everything from them, basically, you win big and they get hurt a lot. If you both defects, you both do. Sort of bad. If you both cooperate, you both do sort of good. But if you cooperate and the other person defects, then you get destroyed. And the puzzle is that if you look at a matrix, whatever the other person does, like a choice matrix, this is where I'm bad at explaining it get to abstract. But whatever the other person does. You defecting is always the better choice for you, and how this is set up. However, if both of you think that way, and you both effect, you're both worse off than if you just both agreed to cooperate. So like a concrete example of this is in sports, and the use of steroids. If you use steroids, and your opponents don't, you can knock them away and win the race or whatever. And that's great. But if the other person says all you steroids to them, neither of you gets an advantage, and you're both sick from the side effects. If only you could just both agree to not use steroids. You'd be on an even playing field and there would be no bad side effects. Of course, there's always a temptation then to use it and hope that the other guy doesn't. So you can pull ahead. But that's a concrete example. Anyone who's interested should Google this. It's called Axelrod's tournament. It's basically a way to optimize playing this game with other people. And it's basically cooperating with other people, and being sure to be around other people who cooperate too. And if you can be around cooperators and be a cooperator yourself, you take off. I could, that's a really exciting idea to me how that's just like mathematically true. That cooperating is a way to win in the long run, but just Google Axelrod's tournament for anyone who's interested.
Ariel Herrera 27:54
Yeah, I definitely will after this. Yeah, that's excellent that you mentioned that, and I love the sports reference. Yeah. Yeah. So love to just learn a little bit more about you Shafi transition this over to hear about what are some of your maybe your main habit that you see yourself following every day.
Shafi Noss 28:16
I think I'm similar to a lot of people, and having a morning routine. That helps me provide a lot of structure. I like to wake up and drink some water and go for a run. And I find that when I exercise in the morning, just my whole day goes better. Yeah. And then I make breakfast, and I pet my cat. And I meditate. Sometimes I don't do that, like a lot, but sometimes I do and it's pretty nice. And then I try to carve out the morning for work. And, you know, sometimes I get tired and I don't do it, you know, religiously every day. But I think having that basic structure is good infrastructure, and it helps me a lot. Get things done. Awesome. Yeah, I,
Ariel Herrera 29:08
I also do the same and petting my cat every morning. And yeah, exercising is key. So what are maybe your favorite book or book that you would recommend to the readers?
Shafi Noss 29:22
I would actually recommend some psychology book. I'm probably the most except the one people may have heard of, is called Thinking Fast and Slow by Daniel Kahneman. It's about your unconscious mind and how much power it has over your life and how it works. That I read that a number of years ago, Kahneman won the Nobel Prize in Economics from writing a psychology book but you know, it's kind of like behavioral or behavioral finance. Thanks. That whole field came from from his work. So that's his book, he just came out with another one actually, which I just bought. The other one is by Robert Sapolsky. It's called the haze. And it focuses more on the biology of things. And it is a deep, deep, that is worth readable, and also acceptable.
Ariel Herrera 30:22
Awesome. I'll have to check. Check that one out. I love like self help, or also just like understanding people behavior. right up my alley. Yeah, yeah. And then in terms of the future of real estate, whether it be in the market itself, technology wise, what are maybe a top trend that you see coming for 2022
Shafi Noss 30:49
investments is going to become one of the major players on the real estate stage throughout the country.
Ariel Herrera 30:55
Yeah, speak it into existence.
Shafi Noss 31:00
No, but I don't know. I mean, I think there are fundamental things like looking at population flow. And you know, Texas, blooming, Florida, the Southeast, and other places. But I tried to be wary of making predictions about complex things like economies. Probably can be done. I try to, I try to not make strong predictions with high amounts of confidence.
Ariel Herrera 31:36
Yeah, I agree with you in terms of like the smile states having a lot of growth. Yeah, continued growth in the next year.
Shafi Noss 31:45
For sure. Cool.
Ariel Herrera 31:48
Well, this has been really awesome. Just hearing more about your background, I didn't even know that you went to Japan for a year. I myself have been there, and it's an amazing country. But where can people find you and learn more about NAS investments.
Shafi Noss 32:04
My website has a little bit of info, but honestly, it's not that developed. Um, I just hired an assistant. So I'm probably going to be putting out some social media every now and then. But I post on bigger pockets very occasionally, but I have a profile there. I have a website that has some basic info. And you know, if anything that I've said here is interesting, or you look around and see our website and that looks interesting, you know, just email me or, or write a message on the website. I like talking to people I like doing business. So you know, feel free to reach out to me. Great. Yeah.
Ariel Herrera 32:51
And at the bottom of the show notes will be Shoppies email, as well as other links to find out more about NAS investments. Well, thank you so much. This has been such an incredible opportunity to interview and hope we could do some more in the future.
Shafi Noss 33:05
Yeah, thanks for having me.